While the bounce in both business and consumer confidence on the eve of the federal election is a hopeful sign for the economy, I suspect it says more about the unpopularity of the former federal Labor government than its does about the economic outlook.

The National Australia Bank’s survey of the measure of business confidence surged to a reading of plus 5.7 in August, from negative 3.4 in July.

Not to be outdone, the Westpac/Melbourne Institute measure of consumer sentiment rose 4.7 per cent this month after a solid 3.5 per cent gain in August.

Whether this bounce lasts remains to be seen, but I’m not counting on a confidence-led sustained economic rebound anytime soon. Instead, I suspect the challenges still facing the non-mining sectors of the economy will soon weigh on confidence and keep consumer and business spending fairly subdued.

The recent optimism seems largely driven by temporary political factors, rather than a more enduring change in underlying economic conditions. According to NAB chief economist Alan Oster, the rise in business confidence was too large and broad based to be explained by the early August cut in official interest rates alone. Instead, Oster reckons “it is likely that expectations of political change and a decisive [election] result were very important".

NAB’s business “conditions" index rose by a lot less and remained at well below-average levels.

Of course, business confidence is usually the first to react to a better economic environment, and if sustained, this should eventually lead to a lift in business conditions. But confidence last month only rose back to it long-run average levels, and weakness in the NAB measures of forward orders, wholesaling conditions and capacity utilisation suggests there’s not a lot of underlying support for further solid gains in confidence or business activity.

Indeed, the rebound in the Australian dollar of late could undermine recent tentative signs of improvement in the trade-exposed sectors. The NAB’s measure of hiring intentions also fell further into negative territory – mirroring the continued decline in the ANZ measure of job advertisements during August.

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As for households, Westpac chief economist Bill Evans noted that most of the increase in consumer sentiment this month came from self-described Coalition voters, meaning “it is reasonable to conclude that the election result played an important if not leading role."

Indeed, Evans notes that the rise in consumer sentiment this month is similar to the rise in March 1996, when the Coalition previously took over from the Labor Party in federal government.

Note, moreover, that households have been chirpier than corporate Australia for some time – without this yet translating into more consumer spending. Although the Westpac/ Melbourne Institute consumer sentiment index has averaged slightly more than its long-run average so far this year, real household spending in the national accounts has grown at a sub-par 2 per cent annualised pace since mid-2012. According to Evans, this may well reflect the fact household perceptions about job security are still fairly poor – notwithstanding some improvement in recent months. The Westpac/ Melbourne Institute measure of unemployment expectations among households has eased 10 per cent in the past three months, but remains 11 per cent above its average since mid-1989.

The consumer sentiment survey also reveals households are more confident about the economy’s outlook over the coming year than their own finances.

Given the dire reading for hiring intentions from both the NAB business survey and the ANZ measure of job advertisements, households have reason to remain fearful over the jobs outlook – and in a unfortunate self-perpetuating cycle, may well keep their wallets shut.

Of course, the pay-off from labour market weakness is that productivity growth (output per worker hour) has rebounded strongly in recent quarters – putting paid to fears that our innovative ability was in terminal decline. Instead, a good chunk of the earlier productivity slowdown appears to reflect labour-intensive expansion in mining capacity, the fruits of which are only now becoming evident through a rise in mining output and export volumes.

To the extent the economy relies on stronger mining exports to support growth – compared to more labour- intensive housing construction or retailing activity – overall economic growth could remain sub-par, but productivity growth above-par – with consequently very weak outcomes for employment growth.

Let’s not forget the former Rudd government itself forecast that the unemployment rate would rise to 6.25 per cent – from 5.7 per cent – by June 2014.

All up, rather than confidence surging higher and dragging up subdued business conditions, the risk is persistently weak business conditions eventually pulls confidence back down again. Indeed, a post-election bounce in business and consumer sentiment is not uncommon, especially when an unpopular government is tossed out – but it does not necessarily last.

After its March 1996 bounce, consumer sentiment fell over the following four months to below pre-election levels.